Currently, near 200 million of the world's population [including 4 million persons in the US] is chronically infected with hepatitis C virus (HCV). HCV causes severe liver diseases, including chronic hepatitis, cirrhosis, and hepatocellular carcinoma. HCV assembly is the least understood step during the HCV replication process and, due to this, little progress has been made toward developing the anti-HCV therapeutics to block this critical step in viral replication. The goal of this proposal is to define the regulatory mechanisms governing HCV assembly process. We believe that achieving this goal by performing the proposed studies will not only advance the knowledge of the HCV assembly mechanisms but also help the development of the antivirals targeting HCV assembly step. Based on the recent literature and our preliminary studies, we propose a novel hypothesis that naturally suboptimal E2-p7 processing is critical for the late onset of HCV assembly by regulating p7-dependent NS2, and consequently NS2-dependent E2 localization, to the virus assembly sites at the DRM. We plan to test this hypothesis by investigating the following specific aims: Specific aim 1 will elucidate the determinants of temporal subcellular localization of NS2. Specific aim 2 will elucidate the mechanism of NS2-dependnet E2 localization to the DRM. Specific aim 3 will determine the significance of E2 localization to the DRM on HCV morphogenesis. Accomplishing these aims will allow us to define novel aspects of the HCV assembly mechanisms involved in the virus assembly-factor targeting processes and potentially to establish the ER-DRM as the site of HCV particle budding.